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MicroStrategy Defies Market, Buys More Bitcoin Amidst Earnings Loss
- MicroStrategy invests US $167 million more in Bitcoin, total holdings reach 158,400 BTC.
- The companies’ losses widened to US $143.4 million yet software revenue exceeds forecasts.
- The position as Bitcoin proxy for equity investors may be threatened by upcoming ETF approvals.
MicroStrategy continues BTC buying
MicroStrategy has acquired an additional 6,067 Bitcoin (BTC) for US $167 million (AU $260 million) since the second quarter’s end, escalating its investment in the cryptocurrency and bringing its aggregate holdings to 158,400 bitcoins as of October’s close.
Despite facing significant write-downs due to the volatile nature of the digital currency market, MicroStrategy has persisted in its strategy of bulk Bitcoin purchases since 2020 as an inflation hedge. The value of Bitcoin has seen a recovery of approximately 30% following an 11% drop in the quarter ending September 30.
Since its initial US $250 million (AU $389 million) Bitcoin investment in August 2020, MicroStrategy has maintained a robust treasury reserve strategy, amassing over 158,400 BTC valued at over US $5.4 billion (AU $8.4 billion).
MicroStrategy Chief Financial Officer, Andrew Kang said,
Our commitment to acquire and hold Bitcoin remains strong, especially with the promising backdrop of potential increased institutional adoption.
Andrew Kang Losses Widen While Software Revenue Exceeds Forecasts
Bloomberg reports that MicroStrategy experienced a substantial increase in net losses, escalating to US $143.4 million (AU 223.21 million), from the previous year’s US $27 million (AU $42 million). Despite the losses, the company’s software business revenue saw a 3% increase to US $129.5 million (AU $201.56), surpassing Bloomberg analysts’ average estimate of US $125.8 million (AU $195.8 million).
The shift to a Bitcoin investment vehicle has led to considerable impairments, with the latest quarterly loss of US $33.6 million (AU $52.3 million) bringing the total to over US $2.2 billion (AU $3.42 billion). This amount represents nearly half of the value of the Bitcoin the company has acquired.
ETF Approval Threatens Position
Under Michael Saylor, MicroStrategy has become a popular stock for investors wanting Bitcoin exposure. However, this could change with the SEC’s likely approval of Bitcoin ETFs. The company has warned that such approval may reduce the premium on its stock, which investors have been using as an alternative to direct Bitcoin investment, potentially leading to a decline in its share price.
The company, once focused on software, pivoted to Bitcoin amid inflation concerns in 2020, acquiring large stacks of the cryptocurrency and seeing its shares triple in value as Bitcoin prices surged, outstripping the S&P 500’s 40% rise. The expected SEC nod for ETFs could impact firms like MicroStrategy that are acting as crypto proxies for investors.
However, Saylor believes there are still incentives for investors to invest through MicroStrategy rather than ETFs. He stated,
There will be fees to invest in a spot ETF. The ability to get Bitcoin exposure and not get charged a fee is another plus for us.
Michael Saylor 
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
